We've examined some of the largest fines for money laundering during 2020. By understanding what went wrong, hopefully, you can avoid the same mistakes.
The penalties for money laundering range from eye-watering fines to prison sentences. Pretty big incentives not to do it? Not everyone seemed to agree...
Biggest AML fines of 2020
- DNB - £34.4m AML fine
- Deutsche Bank - £11.6m AML fine
- Betway - £11.6m AML fine
- Westpac - £700m AML fine
Biggest AML fines of 2020 in detail
1. DNB - £34.4m AML fine
Norway’s biggest bank, DNB, was issued a 400 million kroner (£34.4m) fine for breaching multiple anti-money laundering laws.
Oslo's Financial Supervisory Authority criticized DNB’s poor compliance with Norway's Anti-Money Laundering Act, warning that an administrative fine may follow.
“The possible fine that DNB has been notified of is not related to any suspicions of money laundering or complicity in money laundering,” the bank said and were keen to stress that the fine will only apply to its operations in Norway.
This development comes a year after Norway's chief regulator criticised Norwegian banks for not playing by the rules designed to prevent money laundering from happening within the banking industry. At the time, DNB was subject to a police investigation after allegations that an Icelandic fishing firm used it to launder money through operations in Namibia.
Key takeaways
- Conduct initial and ongoing client due diligence using a risk-based approach with no exceptions.
- Look out for anything about any customer or transaction that is unusual or suspicious - pay particular attention to high-risk customers and jurisdictions.
- Report any knowledge or suspicion of money laundering to the relevant authorities immediately, and take no further action until authorised to do so.
- Avoid tipping off anyone who has been reported for money laundering or terrorist financing.
2. Deutsche Bank - £11.6m AML fine
Frankfurt prosecutors issued Deutsche Bank AG a €13.5m fine due to money-laundering violations connected with Danske Bank A/S. According to prosecutors, Deutsche Bank failed to alert authorities about suspicious transactions in a timely manner on more than 600 different occasions.
Deutsche Banks's case is directly connected to another scandal which saw over $200bn in suspicious payments pass through Danske Bank’s Estonian unit. It has since been revealed that most of this money was also routed through Deutsche Bank, which processed US dollar payments for the Estonian business at the time.
Commenting on the scandal, Deutsche Bank said that it had stopped being Danske Bank Estonia's so-called correspondence in 2015. According to Stefan Simon, a member of Deutsche Bank’s management board, "with the closure of these proceedings, it is clear that there was no evidence of criminal misconduct either on the part of Deutsche Bank or its employees."
Chris Vogelzang, Dankse Bank's CEO, stated that they expect to wrap up their internal investigation into the matter by the end of 2020. Danske Bank is also looking to come to a global agreement with authorities to close the case.
3. Betway - £11.6m AML fine
Online gambling company Betway received a record £11.6m fine by the Gambling Commission for not doing enough to protect vulnerable customers and for money laundering failures.
Its investigation found that one "VIP" customer had deposited £8m and lost more than £4m over a four-year period. Another lost £187,000 in two days after Betway failed to carry out any social responsibility checks.
In total, the firm allowed £5.8m to pass through its business which was found, or could reasonably be suspected, to be proceeds of crime.
Richard Watson, executive director of the Gambling Commission, said, "The actions of Betway suggest there was little regard for the welfare of its VIP customers or the impact on those around them."
However, campaigners say fines like these do not go far enough and are calling for operators to have their licences suspended for such systemic failures.
Key takeaways
- Conduct risk-based due diligence - as part of the on-boarding process and at regular intervals to verify identity and assess how people fund their bets (Source of Funds/Wealth).
- Remember that Know Your Customer checks must also be carried out for a series of smaller transactions with the same person that in total exceed €10,000.
- Don’t assume that, because someone has a UK bank account, they are "safe" - and no further checks are needed. You are required to carry out your own independent checks and document the findings.
- Be vigilant and take action to safeguard vulnerable individuals - e.g. by asking common-sense questions regarding affordability. How can someone unemployed afford to deposit £1.6m and lose £700k on gambling?
- Remember, we have a duty of care towards at-risk groups and individuals - consider what other measures might be implemented (e.g. self-exclusion, debt advice, etc.).
- Immediately report any concerns, knowledge or suspicions - relating to money laundering, terrorist financing, and Politically Exposed Persons (PEPs) to your MLRO.
4. Westpac - £700m AML fine
Australia's second-biggest bank, Westpac, negotiated an AUD 1.3 billion hit settlement for its money-laundering scandal, which led to the departure of its chief executive and chairman.
Under Australian AML laws, banks breaching AML regulations face fines of up to $21 million for each offence. Paedophiles used Westpac's systems to pay for child abuse material without any red flags being raised.
Child exploitation concerns developed when Austrac identified payments made to suspected operators in the Philippines. The Australian media then linked the bank to individual cases, including an alleged paedophile's suspected use of Westpac's transfer system to pay for child sex overseas.
Westpac self-reported some of the breaches to the Australian Transaction Reports and Analysis Centre (Austrac) in 2019.
The penalty is on par with the earlier AUS$700m record fine handed to Commonwealth Bank to settle breaches in 2018.
Key takeaways
- It's easier (and cheaper!) to be proactive and get compliance right from the start - by implementing effective compliance programs. With appropriate governance and oversight, you can avoid financial penalties and safeguard your reputation.
- Ensure your team knows what the deadlines are for reporting large transactions - Commonwealth Bank was fined for late filing because it failed to report transactions within the required timeframe (10 business days).
- Scrutinise and rigorously test automated systems and algorithms - a single coding error was thought to be responsible for some 54,000 transactions not being reported by Commonwealth Bank. Are you confident of your own systems? Have algorithms been rigorously tested before roll-out? And are they reviewed again when changes are made? Have you implemented a change process or procedure?
- Conduct risk-based due diligence - as part of the onboarding process and at regular intervals to verify the identity of individuals, entities and recipients.
- Immediately report any concerns, knowledge or suspicions - relating to money laundering, terrorist financing, and Politically Exposed Persons (PEPs) to your MLRO.
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